Here's why our next president should block AT&T's Time Warner tie-up

AT&T’s plan to buy Time Warner for $85.4 billion is
only the latest of a string of mega corporate mergers that have
been announced in recent years.

That deal would combine the second-largest U.S. cellphone carrier
with one of the biggest content producers in the world, with
cable networks including HBO, TBS and CNN, as well as Warner
Bros. film and TV studio.

But it’s hardly the only tie-up in the offing. Qualcomm wants to merge with NXP
Semiconductors and create the world’s second-largest chipmaker.

Bayer’s bid for Monsanto would result in a company that produces more than a
quarter of the world’s seeds and pesticides.

While recent articles about the AT&T-Time Warner merger have
reminded readers about the negative consequences of industry
consolidation in terms of the impact on consumers and income inequality, there is another reason to
block this and similar mega mergers – and try to roll back ones
already completed such as drug company Pfizer’s purchase of Wyeth in 2009: Such behemoths
manipulate Congress and regulators, undermining our democracy.

As my research shows, nearly a half-century of
corporate consolidation has transformed American politics in ways
that have undermined the ability of government agencies to
respond to voters’ desires and to implement policies that
challenge corporate power.

AT&T President and CEO
Randall StephensonAlex Wong/Getty
Images

Checks and balances

The U.S. political system tends to be seen as one of checks and
balances, with tensions and competing power centers among various
branches of government as well as between federal, state and
local officials. And for most of the 20th century, there has also
been the same sort of balance in the business world as well, with
political power and influence split between national and regional
companies.

For example, Glass-Steagall reformed the financial industry to limit the number of
nationally chartered investment and commercial banks that could
sell their products anywhere, and forbade them from lines of
business reserved for savings and loans. State-chartered savings
and loan institutions, meanwhile, were restricted in where they could do
business.

Similarly, the government licensed television and radio stations
to operate in specific localities. National networks could own
only a limited number of stations and broadcast only at certain
hours, leaving most of the day for locally produced shows.

As a consequence of this national-regional split, local companies had more influence over their state
senators and representatives, both through the financial largess
of their owners and the electoral power of their employees. Thus
the influence of America’s elite on U.S. politics was more spread
out, and regionally focused businesses were able to limit the
reach of large national companies. This prevented a few giant corporations from
controlling government policy and markets.

Mylan
NL CEO Heather Bresch holds EpiPens during a House Oversight and
Government Reform Committee hearing on the Rising Price of
EpiPens at the Capitol in WashingtonThomson Reuters

But that balance depended on vigorous antitrust enforcement.

Part of the problem is that regulators tend to judge mergers on
whether they raise prices and reduce choice for consumers. This
vague standard leaves a lot of wiggle room for the Justice
Department’s antitrust division and the political appointees who
supervise the career of government lawyers.

Challenging corporate interests

So before all these mergers, regional companies served as an
effective check on the power of their national competitors,
providing more room for elected officials to formulate policies
that challenged their more monopolistic corporate interests.

As one or a few companies have come to dominate major industries,
they have the power to block policies that benefit consumers.
These businesses are also able to enrich themselves at the
expense of rivals and others and to appropriate resources needed
for the investments in infrastructure and education that are
needed to sustain American competitiveness.

Enron, which imploded into bankruptcy in 2001, was
emblematic of the political effects of such monopolistic
companies. Enron was able to gain control over energy markets in
a number of states, including California. The company’s leverage
over federal and state regulators ensured that it was able to
overcharge California industrial businesses as well as ordinary
consumers.

The importance of reinvigorated enforcement

getty

The Obama administration has been tougher in reviewing mergers than any
administration since Nixon’s. Yet Obama has not been tough enough
to reverse the tide of consolidation.

Most often Obama administration regulators have merely imposed
limited conditions before allowing mergers to proceed. In other
words, the “gigantification” that has dominated corporate America
for the past 40 years has proceeded largely unhindered.

The question is whether this will change under the next
administration. Fortunately, in my view, there are signs that it will.

Hillary Clinton, for her part, had pledged before the AT&T news to
increase antitrust enforcement, with some of her own economic
advisers arguing that consolidation has worsened inequality by
concentrating profits with a handful of companies. She said
AT&T’s deal deserves close scrutiny.

Donald Trump has come out forcefully against the merger,
declaring it “a deal we will not approve in my administration
because it’s too much concentration of power in the hands of too
few.”

If the next administration is able to follow through – which it’s
free to do without Congress’ approval – room would be created for
more competitors in various industries. Those new, or newly
viable older, businesses will bring their particular and
conflicting interests to bear on the making of regulations and
legislation and on decisions about federal and state spending.
Legislators will come under more diverse pressures and will have
expanded opportunities to attract support and build coalitions.

Politics won’t be a confrontation between the interests of one or
a few corporations against citizens who usually are disorganized
and not mobilized. Conflicts among firms within and across
industries would create openings for less wealthy citizens to
gain leverage as firms need allies in legislative and regulatory
arenas they no longer can control through sheer size.

Antitrust was rightly understood a hundred years ago as a way to
empower citizens as well as to reduce prices and improve product
quality for consumers.

Antitrust again can help reduce the advantage the biggest
corporations have in politics.